Business optimism hits record high across Asia-Pacific and the world towards 2018

Hong Kong – Optimism among business leaders in Asia Pacific has leapt 17pp over the past year to an historic high of 58%. New findings from Grant Thornton’s quarterly business survey of 2,500 businesses in 36 economies, the International Business Report (IBR), reveal that high levels of confidence are driven particularly by surges in China and Japan, where optimism has risen by 21pp and 29pp, respectively, over the same period.

Research from the Grant Thornton IBR also reveals that a revival in exports is taking place across the Asia Pacific region, up 10pp to 22% compared to a year ago, driven by recovering demand for cars and manufacturing equipment, particularly in China, where optimism has reached 78%.

Globally, despite the rise of automation, record global business optimism (net 58%) will see businesses turn to people in 2018 to meet swelling order books. The number of businesses expecting to see both prices (net 36%) and profitability (net 50%) rise have also reached new global highs.

Daniel Lin, managing partner at Grant Thornton Hong Kong Limited, commented:

“Confidence has boomed in Asia Pacific, reaching its highest peak in the history of the IBR. While China has experienced growing levels of optimism over the past year or so, Japan’s break into positive territory is a real sign of change in the region. As global trade improves, firms in Japan and China are also thinking about the future and investing in their long-term growth.

Concerns over trade still exist, with continued uncertainty surrounding the Trans-Pacific Partnership (TPP) and doubt about the benefits of China’s One Belt One Road Initiative to countries in the region that are not linked by land to China.”

Where businesses in other parts of the world are scaling back their investment, those in Asia Pacific are planning to spend more on research and development, up 10pp to 39% compared to a year ago, as well as plant and machinery, up 9pp to 33%. China is particularly focused on these elements of longer-term growth, with 58% of businesses expecting to invest in research and development compared to a global average of 25%.

Findings from Grant Thornton’s IBR reveal that the desire to expand workforces comes amid healthy levels of demand, as the proportion of firms concerned about a shortage of orders falls to net 23% globally – the lowest figure recorded in a decade of IBR research. Firms are feeling confident enough to raise prices, with net 36% of firms planning to do so over the next 12 months, while net 50% of firms expect higher profits compared to net 41% a year ago.

In line with the global trend, China has recorded an optimism at its highest in ten years (net 78%). Chinese firms have shown strong optimism about the economic outlook in the next 12 months – net 72% of the enterprises expect their revenues to increase compared to net 44% a year ago. Expectation on selling price has gone up by 8pp to 43% while 58% of the firms expected higher profitability compared to 29% a year ago, which is the highest figure in 3 years.

Despite a positive picture overall, there is cause for concern in India, where – year on year – expectations have dropped across profitability (-23pp to 39%), employment (-18pp to 39%), selling prices (-17pp to 34%) and investment in new buildings (-11pp to 14%). Firms in Australia and New Zealand have also reported significant falls in export expectations, each of 12pp to 7% and -6%, respectively, year on year.

Daniel added:

“Although there are signs that 2018 marks the peak of business and economic cycle, as forecasts suggest that global GDP will fall away from 2019 onwards, firms must avoid short-termism and increase their investment in long-term growth.”

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